uh welcome to a scrap life a podcast solely focused on the hustlers grinders operators and business owners who live and breathe the scrap metal industry every day we are the original recyclers no suits required just guts and hard work here is your host brett eckhart all right i’m sitting here with chad ellerbrock with uh best scrap advice ever um he is a scrap buyer for a profession so guys like him and myself we go at it once a month most of the time it’s all love every once in a while we get in some heated discussions about i think the price should be higher they think it should be lower but uh chad hit me up a couple weeks ago and he said hey man i got an idea to bring a little bit more value to the audience and i said i’m all about a good idea and so he said hey what about doing like a bulls bears you know positive negatives what can the market expect and i said yeah man let’s do it so this is our first run first iteration of bowls versus bears today i’m representing the

bull side which that’s usually the case i’m trying to push the argument for a higher pricing on the ferris side and uh chad wouldn’t be doing his job correctly if he wasn’t trying to buy it you know as right as he could so thanks for the idea chad and welcome man i feel like uh i follow you on linkedin and you’re consistently talking about uh scrap going higher in your big pile so i think we got to talk about this give you perspective for the other side so that’s why i’m a dreamer i’m a dreamer and i you know i’m always living in dreamville sometimes the the dreams come to fruition sometimes uh they get stomped on but uh i’m thinking november is going to be a pretty good month my dreams might come true for the with a good strong up month well that that could be true but but here’s my question so we i mean it’s pretty seasonality you see a lot of guys go down for maintenance especially in december you know so i feel like as a buyer you continually you’ll hear or the guys that are more more

bearish will say our the guests from the bullish perspective will say hey look if i don’t get the price i want i’ll just hold it right and so what do you i mean what do you think of that is that uh going to be a lot of people’s perspective this month going into november i think it’s becoming easier to hold it because the supply chain issues has uh created such a an entangled mess of being able to move material i mean i think it used to be that the rail was you know a complicated issue to figure out now that’s actually probably one of the stronger points and trucking has now become an issue so i think it depends on your location whether it’s going to be easier or tougher for you to hold guys inland with maybe not rail access i think it’s it’s an easy argument for them to say i’ll hold i’ll wait for maybe some of these uh supply chain disruptions to be more in my favor and the price of freight might come down but do you feel like it’s realistic both by especially by truck i feel like

it’s probably not but even even by rail i feel like if you if you move 100 cars in october right and that’s your normal month in november you don’t get the price you want i mean does that mean you can actually get in 200 cars in december to move to all the times you need to i think that it’s going to be a challenge but i think it depends on your willingness to sit on cash i think right now where the people feel like inflation is coming it’s not as it’s not as a big of a deal to sit in metal versus sit in in dollar bills so the the case can be made that i would rather sit on iron in an inflationary environment and take my chances versus sitting in cash just moving iron to move iron and putting dollar bills in my bank account that next month next year could be worth less than they are if it’s if it’s actually in hms one and two in a pile but i think for perspective though it’s like what percentage i mean how much percentage can a guy really hold he really

can’t hold hundred percent right is that ten percent is that twenty percent is it fifty percent i’m guessing it depends on the cash flow situation of the seller the guys looking in cash strong position positions and let’s say you have a 10 acre yard and you you’ve got space i think if i was a buyer i’d be looking at my customer and i’d be saying how much space do they have what kind of cash position do i feel like they’re in and i’d be buying according to those two factors because to at today’s price where the most sellers are going to feel like they need to be it might be a little rich for the uh on the buy side so from my bear’s perspective of saying a guy can’t hold it even if even if he has the cash he has a space the thinking of they’re not going to be able to get it out even logistically and you have so many people that are probably going to be thinking alike so when we when every scrap dealer takes the same position is it really a position anymore there’s no uh no

v val validity there i it’s something else to take into consideration if you’re a buyer and this is why i’m bullish on the market moving in moving stronger into november and december is a lot of people have booked a pretty good year already so for them to go in and turn that turn that iron into a profit versus sitting on an inventory going into a strong financial year are people really going to want to book those profits so you’re going to have to pay a pretty big price to bring that material off the sideline counting if you take into consideration logistics logistic issues you take into consideration it’s been a pretty um fruitful year for most of these scrap recycling facilities and uh you take into consideration potential inflation going into 22 i feel like it’s going to take a pretty big number to drag that material into the yard and i think you know i hate to hate to agree with you but i think you won that point and and on more of a bullish case i think when you look at export you know if you check out that the chart

or the any resource that has that export numbers that number’s up almost 50 to 60 today versus the end of september so it’s a big number that and combine that with container freight actually easing off at the same time um bulk freight is is kind of starting to flatten out level out the guys i talked to so if you’re getting big big increases if you’re looking between 60 to 70 bucks on export container container pricing is starting to move down whether you can get a booking whether you get that container loaded that’s another conversation and that might be your the point the point that the bears make from an export side but it feels like the freight component is starting to ease up a little bit when it comes to containers um as far as uh price per ton now availability could be that’s another this could be another question yeah and that i guess that would be my biggest bearish case is that things have to keep moving otherwise to throw a wrench in this system into your logistics feels like it feels pretty tough to make that up at some point it

does it does and then and it comes back down to cash flow i think i think if if this if this year was a really volatile year and if it was a year of big ups and big downs and i think that you know from a cash position you’re you’re dealing with guys that have probably had a pretty good year most likely and it’s going to take some pretty strong motivation to get them to to move off those tons and book those profits when they could you know maybe push those into 22. and so when you think about steel demand what are your what is what is your perspective on that it feels like uh those levels are higher month over month so if people start holding because they don’t want to sell or because they feel like the market’s going to go higher i mean the mills seems like they’re going to still need it uh which isn’t which isn’t which creates an environment of even more pressure to go up right i feel like 2022 is going to be a big auto year right you just saw that uh two of the

mills what one was in elkhart and where was the other one at come out and say they were going to take down um take down for maintenance at the end of this year in anticipation of a strong auto year and 22 which feels like if that is going to be the case then otto could put the auto market could put a tremendous amount of pressure on the new steel side um and keep the price of coil you know hot roll up where in that 1900 range you’re starting to see that thing level off and maybe roll over a little bit but my question is is it rolling over because it’s it’s setting itself up as a new base to cut to go stronger to 22 or is it rolling over because just like pig iron is starting to kind of uh to kind of go down the other side of the mountain yeah so i mean more automotive means more bushling does that mean we doesn’t that mean weaker bushling prices in the future i think it could be i think if you’re in the prime market that uh that could be a tough

business to be in the the guys that are in the cut grade business the hms um the number two bundle side but mostly cut grade hms i think they’re in a stronger position in 22 because if the export market does pick up steam then you’re we’re about to potentially have that good 2007-2008 scenario where strong domestic market plus strong export market puts two buyers at the auction and now you’ve got real price pressure yeah what about i mean from another when we’re talking about steel do you feel like hot roll on some other things i mean those charts indicate that we could have peaked we could be at the top already and we’re on the other side of the mountain what are your what are your thoughts there i think that it should level off here if especially as more um more mills come to the table and more capacity joins the party the the what’s going to be interesting to see and i i really believe one of one of two things is going to happen either the steel mills are going to tighten their margins up and try and keep the

price of new steel where it’s at today pay more for scrap and and tighten those margins up or um they’re going to defer to the export market to basically push those pricing and they’re going to try and keep the margin that they have today and that’s where really i think that the export market’s going to be the driver the outside driver that’s going to push this thing or pull this thing down but i feel like it’s going to go i think i feel like the u.s has had a pretty good run domestically and the export market um could be the 2022 um driver versus 21 has been you know very you know domestic driven it feels like so if you if we look at those charts we’ve seen the import numbers those are up pretty considerably every year around over 30 percent so i feel like to be bearish right you have more imports coming in you got peaking of steel prices i mean all those things are not not good uh potentially for future future steel sales yeah they’re not good for the domestic steel market maybe looking into 22 but they

could be positive for the uh domestic scrap market as far as export opportunities if some of these other countries decide to really start pushing opening up you know we get a fully open 2022 you’re looking at some potential world demand um opportunities versus really right now we’ve been relying pretty heavily on domestic demand oh man you did not look at those uh that chinese steel rebar pricing that yeah i did but you know what i’ve i’ve made a pretty good living in life going against what everybody else is doing and i feel like everybody’s discounting the chinese market right now they’re discounting and rightfully so they i have some structural issues um with ever grande and some of these property developers um but i i also strongly believe that the chinese are i mean what are the two countries that didn’t attend the uh the environmental uh summit of 26 today i i can’t uh camp russia and china the two biggest polluters right do you think those guys are worried about energy and coal-fired plants and glass furnaces or you’re going to go out and uh make metal if that’s what if

that’s what what they need to do to support their country but brett we’ve already seen everglades a company in building already almost going bankrupt right one of the largest private whole our largest real estate companies in china so that means less less deal demand because who’s going to be building when the largest is going bankrupt and that’s when it pays to be a communist country because whenever grande steps aside who’s there to fill the shoes you know the next one up right and i feel like when your country is is built on gdp increasing anywhere from six to 15 percent annually if you think that they’re just gonna let that thing go and just stop and let the price of rebar go to dirt then i feel like that’s a pretty short side of view yeah well i feel like if you see um worldly steel prices whether that’s just china or others right if those start coming down and we iron ore has taken a nosedive which could drive a lot of scrap substitutes and and even though we’ve gotten really good pricing in the us on scrap and steel if steel starts

going down i know there’s a lot of margin in there that these guys can still still make a lot of money on the steel mill side but it feels like historically when steel starts to go down so does scrap and i feel like whenever that time comes they’re going to be use the leverage of scrap substitutes to push down the scrap market historically when the price of new steel went up so did the prices scrap too but we haven’t seen that so for me to believe that historically when the price of new steel goes down the price of scrap goes down i guess i’m going to say that trend has been broken right so i have a point there so i i i would tend to believe that if i’m a steel mill and the main input i need to make new steel is scrap then and i still want to book sales i’ve committed to customers and even though the pricing environment on the new steel side may not be as strong as it once was i’m still going to need that input material so i’m still going to have to pay for

that and knowing that i’m running historical margins and that i can probably tighten up i feel like that’s strong for the domestic scrap market especially if you take into consideration that maybe just possibly the export market might pay just enough to make you tighten your margins interesting perspective that’s for sure and i i can’t disagree that that the the difference between scrap steel historically was in contango that’s obviously not the case anymore over uh 2021. the last bear point i have is is the purchasing metric index is lower and consumer confidence is lower month over month what are your thoughts i feel like it’s been a it’s been a it’s been a run of all run consumer confidence in my opinion is very politically driven um if you had peak consumer confidence and peak pmi i think that you would be looking at an environment where the politicians would feel okay with increasing interest rates i think they can get away with not increasing interest rates for the time being because consumer confidence is on the lower side um you can adjust that and fudge that number however you want i feel like that

that’s a politically driven number um versus pmi that the purchasing manager manager is strong and that could have some supply chain um metrics driven pushed into it um so those two metrics for me on a scrap cellar side don’t hold a lot of weight if anything that should create a bullish case for for scrap and a bullish case for more inflation because they aren’t that means they’re they’re not going to do anything to disrupt the consumer anymore than they already are today because they’re going to try and get that confidence number up well i’ll say this for to argue the bears perspective in this market this being the first one this wasn’t fun but your day’s coming i have a feeling we talked about a lot of great points and you know i think obviously with your experience you got a lot of good ones i i try to put my spit and my bearish spin on it i don’t know how well it worked this month no i did man this has been great um if people want uh your two cents on the market and to basically do some overall you know

uh market readings where would they go to look at look that up yeah of a blog best scrap ever.com where i put just what i you know being in the scrap metal business for 10 years i feel like every whether the the small mom-and-pop recycling centers to the big ones they’re all looking at different data what i’ve tried to do is put together data that that everyone can have it’s free that way they can develop their own market opinion and that’s at bestscraper.com all right man go check that out if you haven’t seen it go check it out thanks chad appreciate you uh giving me get bringing this idea bringing it to the table and man next month it’s on thanks brett all right take care bye